Rice prices set to shoot up on pawar shortage

The Centre is giving 'serious thoughts" to demands of certain rice-producing states to provide bonus on paddy over and above the current support prices of Rs 950 and Rs 980 a quintal for the common and Grade A varieties.

Sep 25, 2009 12:09 IST India Infoline News Service

Brace up for higher prices for rice, which is already costing the consumer 14% more this year compared to the last. The Centre is giving 'serious thoughts" to demands of certain rice-producing states to provide bonus on paddy over and above the current support prices of Rs 950 and Rs 980 a quintal for the common and Grade A varieties.

This was stated on the first day of the National Conference on Agriculture for Rabi Campaign by food and farm minister Sharad Pawar (see ET, August 24). While this is in itself an indication that the Centre apprehends that domestic rice (exports of which were relaxed just recently by a reduction of the Minimum Export Prices or MEP for Basmati varieties recently) supply may be tight compared to domestic demand, the minister also said that rice retail prices could go up.

Commodity experts apprehend that this could impact on market sentiments and push the retail prices for rice upward despite the Centre pinning big hopes on Boro rice in the coming Rabi season making up for some of the shortfall.

Production this year is projected by the government (and voiced by FM Pranab Mukherjee) at around ten million tonnes+ compared to last year. The production in 2008-09 was 99 million tonnes. "This is a sensitive issue. The farm and food minister of the coutnry should refrain from making such observatiosns," a Delhi-based rice sector commodity analyst maintained.

The late admission on the extent of rice output shortfall follows the pattern on sugar production as well. The government's refusal to acknowledge the gravity of shortfall of that commodity thanks to poor production this year has already forced up prices by 45% over one year for the consumer.

Ironically, the sharp hikes in the retail price of key agri commodities come in a year when half the country's districts have been drought-struck this monsoon.

While the price for rice of different varieities has already gone up in the last four months by Rs 4-5/kg in the retail, the price for pulses has shot up significantly with that of toor going up to Rs 80-85/kg and other pulses such as moong and urad following suit. That is, 40% higher prices than the consumer paid in May-June this year.

An early meeting on Rabi Campaign would give a good opportunity to paln well in advance the steps needed to mitigate the situation arising out of the partial failure of kharif 2009, Mr Pawar said at today's meeting, but the prognosis still hangs fire on Rabi wheat output.

Area under paddy dropped by about six million plus hectares and by end August, a 10% production drop was already being speculated upon. Despite that, the government continued to hum and haw on the question of a paddy bonus, primarily in the hope that the private sector would stay away from big buys at higher than MSP prices from them, given the good paddy harvests for the last two years.

Now, towards end September, the readings on paddy output and rice availability in 2009-10 are apparently beginning to ring alarm bells loudly. "We had to wait until end September to make a clearer assessment of paddy production and rice output, after all. It was too early a month ago to be able to project this clearly," a food ministry official preferring to remain anonymous, said.

In the 2008-09 season (October-September), the government had by end August procured about 325 lakh tonnes of rice. A food ministry official had told ET at the time "There is already a significant quantity of rice in the market for the private sector to access, thanks to two successive years of record paddy harvests. So, it is unlikely that the private sector will make any big purchases from farmers at higher than MSP prices."

The implication then was that paddy farmers would sell to the government at the fixed floor price and without entailing additional expenditure for the government by way of a bonus on paddy. The rice supply shortage and projected hike in rice price come in the immediate aftermath of a Assocham report that warned that India could be inching towards becoming a net rice importer by 2020 if it fails to maintain 1.75% per annum growth in its yield for next 10 years.

The rice yield growth in India at current rate is estimated at 1.18%. That means that rice production would reach at levels of only 108 million tones by 2020 against its projected requirement of 118 million tonnes.

Source: The Economic Times

Related Story

Open Free Demat Account (Rs699)